Tuesday, September 15, 2009

It's the best of all possible recessions after all. 

It's one year today since the bankruptcy of Lehman Bros. And for a year the mavens have been telling us this was the singular event that triggered greatest world-wide financial crisis since the Great Depression, and which turned a mild recession into the worst in 35 years -- and that permitting it was the single worst mistake government policymakers have made during this whole painful, expensive episode.

Ah, but now, on second thought, the NY Times tells us it was "the luckiest thing that could have happened"! In so many ways!

...That is one reason the Lehman default turned out to be a good thing. Hereís another: If Lehman had been sold to Bank of America, as originally planned, some other firm ó no doubt bigger, and posing more danger to the global financial system ó would have failed instead. By then, there was simply too much panic in the air. A crisis of some sort was inevitable....


... Almost everyone Iíve ever spoken to in Hank Paulsonís old Treasury Department agrees that without the immediate panic caused by the Lehman default, the government would never have agreed to make the loans needed to save A.I.G., a company it knew very little about.

In effect, the Lehman bankruptcy caused the government to panic, which in turn caused it to save the firm it really had to save to prevent catastrophe...

Ah yes, a calamity great enough to incite immediate panic in world leaders is good!

Two thoughts about this kind of revisionism...

(1) Editor to writer: "It's the one-year anniversary and we need a story line that everyone else hasn't already used 10,000 times."

(2) Giving the concept all it is due: Yes, life is a one-time trial. There are all kinds of "butterfly effects" with big consequences occurring all the time that we don't recognize. Maybe if Hitler had been killed in 1938 then World War II would have been fought ten years later with all sides using nuclear weapons, so the world was lucky he lived as long as he did. Who knows? We can't re-run history 10,000 times to see what caused what. Nobody knows nuthin'. I do believe that.

But if the NY Times wants to go down this road, it would be nice if it remembered how little it knows during a year of telling us as a fact that "this caused that", before telling us as a fact "nope, that caused this". It might become a bit more modest in some of the other opinions that eminate from it as well.